breadcrumbs: a series of connected events

Announcement to Sunset CityPockets on June 30th, 2012

At some point after our closure on 6/30, I’ll publish a personal account and post mortem of why we decided to shut down CityPockets, my beloved app that I and many others have so passionately loved. But for now, we’re pretty busy working on Reclip.It.

The day we sent an email out to our users was most crushing. We had a flood of tweets, emails, and messages coming in, pleading us to keep it up, that there’s currently no better app out there to help manage their daily deals. A group of girls even left me a voice message asking me to set up a kickstarter page. They proposed that if we can get 10K users to pay $1 each month, that we could easily hire an engineer to keep it running. 🙂 I was very touched by how much our users valued the app. Despite us having to shut down, the feedback on the product is probably one of the most rewarding in my lifetime as an entrepreneur. I still wish I could keep it up…

Here’s my interview with GigaOm on why we did the inevitable:

Closure of CityPockets provides window onto shakeout in daily deal business

By  May. 10, 2012, 1:06pm PT

Less than a year ago, it looked like CityPockets, a NY-based startup that organizes daily deals and provides a secondary market for them, was in a groove. It scored $750,00 in new funding, made an acquisition and was rolling out product enhancements. But this week, the company said it was shutting down and pivoting to a new opportunity in social couponing.

Amid concerns over Groupon’s health and debates over deal fatigue, the announcement seems to be the latest sign of an industry in turmoil.

Cheryl Yeoh, CityPockets founder and CEO, said that though they had a loyal user base, as they talked to investors, they realized that the industry was perceived as too risky and unstable. “It’s a relatively new space” she said. “It’s hard to build a business model on top of an industry that’s always changing.”

More consolidation on the horizon

Even though they were able to raise a seed round in the summer, investors in subsequent conversations indicated some wariness about the space, as they waited to see what happened with Groupon. Meanwhile, she said, at daily deal summits around the country, the mood shifted from one of optimism to one of apprehension.

Over the last couple of years, the deal space has grown crowded. There are now hundreds of sites offering some kind of daily deal service. Some target a range of consumers while others target specific demographics or interest areas, like travel or sports. Still others aggregate deals, organize deals, or build white label deal sites for publishers.

Yeoh says the chatter among smaller companies in the space used to be about ways to get bigger through venture funding, but that conversation has shifted more to talk of exit strategies. “At the first daily deals summit, it was more about partnerships,” she said. “Now it’s smaller companies trying to sell and pitch to bigger companies.”

Speaking at the April Daily Deals Summit in New York, David Tisch, managing partner of TechStars, said the name of the industry itself was starting to bear a “poison”-like connotation. Between getting merchants to sign up (and stay) and keeping consumers subscribed, daily deals companies are getting squeezed from both ends, Yeoh said.

As the industry evolves, she expects to see standalone deal sites and aggregators get rolled up into bigger companies, including publishers.

Big publishers, specific verticals find opportunity

“I don’t think daily deals are going to go away,” she said.

Yeoh said publisher-backed daily deal programs, like the Washington Post’s “The Capitol Deal,” seem to be doing well. So white label daily deal firms may also have opportunities for partnership. Some vertical-oriented daily deals sites also seem to be holding strong, she said. For example, Plum District, a deals site for moms, raised $20 million from General Catalyst Partners and Comcast Partners in December, and Zulily, a site for moms and kids, raised $43 million from Meritech Capital Partners in August. But over the past few years, most daily deals have shut down.

According to Yipit, a NY-based daily deals aggregator, the industry continues to grow. Unaiz Kabani, Data Product Manager for Yipit, said that while they’re not seeing “the same levels of astonishing growth” from 2011, the industry did show “low double-digit” growth from the fourth quarter of 2011 (which saw strong holiday sales) to the first quarter of 2012.

“Certain larger players, namely Google Offers and AmazonLocal, continue to make heavy investments, and the impact on their performances is definitely noticeable,” he said in an email. “Newer categories, travel and consumer goods, have also taken off quite quickly.”

But the industry has shrunken considerably. At the peak, Yeoh says that there were some 800 deal sites; now she estimates that the number is closer to a few hundred. As the industry evolves, Yeoh believes the focus will shift from prepaid, urgent, one-day-only vouchers to social commerce that increasingly integrates mobile and location technology. (Or “SoLoMo” commerce as we increasingly hear.)

For her part, Yeoh has pivoted to a startup called Reclip.it, a social platform that she says is like a Twitter meets Pinterest for couponing. Like CityPockets, its goal is to aggregate deals for passionate shoppers (moms in particular). But instead of building on top of a risky, new industry, she’s chosen one that goes back generations.

“We’re trying to figure out how to build a platform that can transform the traditional couponing space into something fun and visually appealing,” she said. “We’re trying to make it cool again.”

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